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How A Kidney Drug Almost Torpedoed Concert Pharma’s IPO

[Updated, 4/27/14, 10:49 am ET] Drug development is a humbling thing. Hard as you might try, the numbers show that 90 percent of the time, you’ll fail. What if the signs of such a failure were to emerge, of all times, when you’re pitching an IPO? That’s just the situation that Concert Pharmaceuticals confronted last summer, and it almost derailed the company’s attempt to go public.

Spoiler alert: Concert wound up pulling off its IPO in February of this year, pricing at the top of its range and pulling in a total of about $75 million. But today the Lexington, MA-based biotech (NASDAQ: CNCE) is unveiling details about the study that could have tanked the deal—a Phase 2 trial of a drug intended to slow kidney damage in patients with diabetes. That molecule, CTP-499, is the most advanced of Concert’s drug candidates, and the company’s first shot at proving in a large trial that one of its wholly-owned programs can deliver.

The results, at first blush, don’t look good. The study didn’t hit its pre-specified main goal, which was to show that patients who took CTP-499 for 24 weeks had better numbers on a measure of kidney damage, the urinary albumin to creatinine ratio (UACR), than patients who were dosed with a placebo. Yet to hear Concert executives talk today, CTP-499 still has a bright future and a reasonable chance of succeeding in a big Phase 3 study. Concert is pointing to the fact that patients taking CTP-499 for 48 weeks had better measures of serum creatinine—a waste product that builds up when damaged kidneys fail to filter it from the blood—compared to the placebo group. And data on two other biomarkers indicate the drug might protect the kidneys from scarring, according to Concert.

Concert CEO Roger Tung (pictured above) argues those secondary data are actually more important. A big effect on serum creatinine would be a statistic that the FDA would value more highly than UACR, Tung says.

“UACR measures tissue damage, but it doesn’t really measure the ability of the kidneys to filter blood, and that is functionally what you want your kidneys to do,” Tung says. “What we saw were unpromising results on a biomarker that’s probably not ultimately relevant, and longer term positive results on a measure of kidney function that we think really tells the story about the drug.”

These are, of course, the kind of sentiments that prompt sideways looks from investors all too familiar with biotech data spin. After all, if the serum creatinine measure is so important, why didn’t Concert make it the primary goal of its study in the first place? Meanwhile, why isn’t the drug affecting UACR levels the way Concert hoped? And can the company successfully run a new trial with different goals, and produce data that move the needle at the FDA enough to get the drug approved?

To begin to answer those questions, it helps to understand a bit about Concert’s history before and after the moment last August it saw the 24-week results from the CTP-499 trial—results that almost rendered the IPO dead on arrival.

Still, Concert had always intended to develop its own drugs as well, and had been using the partnership dollars to push CTP-499 through clinical trials—that is, until the IPO window swung wide open last year and gave the company another option.

At the time, Concert was awaiting the first readout from its Phase 2 trial of CTP-499. And Tung says Concert looked at it as a low-risk program. After all, CTP-499 is based on … Next Page »